F/S 05 Red Brawn CC SE....Maybe

[scotty]

Thats not always a good deal as the 2nd loan is at a much higher interest rate and is usually for a shorter term. You can try and finanace the PMI into the mortgage and pay it all in a lump sum up front. Tahts way its in the 1st nmortagage and is now deductible. Plus the total payments wil be lower than th two loans.

[kvoman]

Getting a 2nd is an option of having not to pay PMI. Most lenders won't allow you to lump the PMI payment into the loan because it is not deductible and I don't think the feds allow you to claim fees as deductibles either.

Why do you have equity when you just buy a house and get an 80% 1st and a HELOC? I'm not sure that I'll be able to answer this properly - but they are two different loans but both are based on the appraised value of the house. To each lender, your financial obligation is only to that certain percentage of the house (80% for the 1st and 20% for the HELOC/2nd). Furthermore, in order to get approval for the HELOC/2nd, they have to subrogate to the 1st, this means that if you default on your loan(s), the lenders can sell your house and the first lender will get paid first before anyone else. I think a loan broker will better explain this situation or any loan questions you may have. That's why I think it's very important to get a good loan broker.

Yes, Scotty is right, the interest on a second/HELOC will be a bit higher but all the interest is deductible, not like PMI fees. But it's another way to get you into that house and increase your buying power.

Oh, BTW - whichever direction you go - make sure you get a loan(s) that does not have prepayment penalty! I got zapped with this minute detail on my very first house. Glazed over me when the broker explained it to me. I was too giddy over the prospect of owning a house and didn't fully realize the financial implications of the prepayment penalty until later when I refinanced.

[SickWhip]

Thanks for the info but I have another question. HELCO means home equity line of credit right? So how do I have any equity in a house I just purchased, with the assumption that I payed market value for it. I hope this is not too dumb a question.

[Pete Rock]

If you paid market value you won't have any equity. You will have to wait a while and hope that the house appreciates in value. I am not sure how the market is where you are at, but here in CA houses have been appreciating at an unbelievable rate. If you have good credit you won't have to wait long. There are banks out there that are willing to give helocs up to 125% of the value. Now, they might be at a higher rate but you might want to look into that.

[kvoman]

You're pulling my leg, right!!!

Talk to your loan broker and ask them about the differnt loan programs that will work for you. Tell them you want to buy a house, want to finance $$$$, so what kind of programs do they have that do not result in you having to pay PMI - if you down less than 20% or none at all? If you have a good loan broker, they'll be able to get you some great loans. HELOC/2nd/etc., it's symantic, as long as it works, does't matter what it's called? We have done it so we know that works.

What works here in CA (negative amortization, 90-100% financing combination of 1st & HELOC, interest only, etc.) may not work elsewhere.

[SickWhip]

Thanks again for all your help guys!! I'll have a talk with countrywide.